AMENDMENT NO. 2
TO

    SECURITIES PURCHASE
AGREEMENT

     

    This
Amendment No. 2 to Securities Purchase Agreement (“Amendment No. 2”) dated as of
December 15, 2009, is made by and between Axion Power International, Inc., a
Delaware corporation (the “Company”) and The Quercus
Trust (“Quercus”).

     

    RECITALS

     

    A.           WHEREAS, the Company and Quercus are parties to that
certain Securities Purchase Agreement, dated as of January 14, 2008 (the “Original Agreement”), as
amended by Amendment to Warrants and Securities Purchase Agreement, dated
September 22, 2009 (“Amendment
No. 1”). The Original Agreement, as amended by Amendment No. 1 is
hereinafter referred to as the “Securities Purchase
Agreement”. Capitalized terms used herein have the respective meanings
ascribed thereto in the Securities Purchase Agreement unless otherwise defined
herein.

     

    B.           WHERAS, the Company now proposes to enter into a
Purchase Agreement (the “Purchase Agreement”) with the
investors party thereto (the “Investors”), pursuant to
which the Investors propose to purchase from the Company an aggregate of up to •
shares of common stock, par value $0.0001 per share (the “Common Stock”) at a purchase
price of $0.57 per share (the “New
Investment”).

     

    C.           WHEREAS, in order to induce the Investors to enter
into the Purchase Agreement, the parties desire to further amend the Securities
Purchase Agreement and the Warrants as set forth below and to waive certain of
the provisions thereof effective as of the closing of the New Investment (the
“Closing”).


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    AGREEMENT

     

    NOW, THEREFORE, in consideration of the mutual covenants and
other agreements contained in this Amendment No. 2, and intending to be legally
bound, the Company and Quercus hereby agree as follows:

     

    1.           Quercus
hereby irrevocably waives any rights it has pursuant to Article 4 of the
Securities Purchase Agreement with respect to any Cut Back Shares.

     

    2.           Sections
4.3 and 4.6 of the Warrants are hereby deleted in their entirety. Not later than
the Closing, Quercus shall surrender the Warrants to the Company in exchange for
new Warrants of like tenor reflecting the changes made to the Warrants pursuant
to Amendment No. 1 and this Amendment No. 2.

     

    3.           No
later than the Closing, Quercus shall pay to the Company $500,000 by wire
transfer of immediately available funds to an account previously specified by
the Company in writing.

     

    4.           Section
5.8 of the Securities Purchase Agreement is hereby deleted in its
entirety.

     

    5.           The
amendments and waivers of the Securities Purchase Agreement and the Warrants are
expressly conditioned upon and shall be effective immediately prior to the
Closing of the New Investment. In the event that the New Investment is
abandoned, the terms of this Amendment No. 2 shall be void and of no further
force and effect.

     

    6.           Except
as expressly modified hereby, the Securities Purchase Agreement and the Warrants
shall remain in full force and effect.

     

    7.           The
Investors shall be deemed to be express third party beneficiaries of this
Amendment No. 2 and each Investor shall have the right to enforce this Amendment
No. 2 as if it was a party hereto.

     

    8.           This
Amendment No. 2 may be executed in counterparts, each of which shall be deemed
an original and all of which together shall constitute one and the same
instrument.

     

    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    IN WITNESS WHEREOF, the parties hereto have caused this Amendment
No. 2 to be duly executed by their respective authorized signatories as of the
date first indicated above.

    


    
      
        	 
      	
                AXION
      POWER INTERNATIONAL, INC.

              
	 
      	 
      
	 
      	
                By:

              	 
      
	 
      	 
      	
                Tom
      Granville, President

              
	 
      	 
      
	 
      	
                THE
      QUERCUS TRUST

              
	 
      	 
      
	 
      	
                By:

              	
                /s/ David Gelbaum

              
	 
      	 
      	
                David
      Gelbaum, Co- Trustee

              
	 
      	 
      
	 
      	
                By:

              	 
      
	 
      	 
      	
                Monica
      Chavez Gelbaum, Co-
Trustee